Singapore system awaits FSC OK

HOLDUP The government will not let investors join Singapore's new electronic system for Taiwan futures until the settlement mechanism has been changed

By Amber Chung / STAFF REPORTER WITH AGENCIES

The Financial Supervisory Commission said yesterday that the government has yet to allow investors to join Singapore's new electronic trading system for trading Taiwan stock futures, although the Singapore Exchange Ltd is scheduled to begin the new electronic trading on July 1.

Taiwan investors accounted for about a third of turnover in stock futures based on the Morgan Stanley Capital International (MSCI) Taiwan index under Singapore's old open-cry system, which will be phased out totally on June 30, leaving only electronic trading for investors.

Financial regulator has said that for the ban to be lifted, Singapore Exchange must change its settlement system.

"We are slated to have a meeting with representatives from the Singapore Exchange Friday morning ? to come out with a solution for the issues of information sharing and the settlement system," the commission's Chairman Kong Jaw-sheng (龔照勝) told a press conference yesterday.

In addition, the financial regulator said it hoped its Singapore counterpart would obtain Taiwan's authorization before purchasing TAIEX data from Reuters Ltd.

Currently, Taiwan does not authorize Reuters to duplicate the TAIEX data they acquire from the Taiwan Stock Exchange for third parties to use in designing financial products and derivatives, the commission's vice chairman Lu Daung-yen (呂東英) said.

Lu said the commission hoped to sort out a discrepancy in settlement systems, which has to some extent affected Taiwan's spot market, in a meeting today. But market watchers said the commission's objection may be partly due to fears it will compete with Taiwan's own futures market.

While Taiwan fears the Singapore-based futures market, with lower costs, will compete with its own stock futures based on the benchmark TAIEX share index, the Singapore Exchange indicated the impact on total volumes of a ban on Taiwan investors joining the electronic platform would be limited.

"We have enjoyed broad-based support for this contract, especially from international participants. The direct order flows from Taiwan domestic customers now account for less than 10 percent of our total volume," a spokeswoman for the stock exchange said.

Singapore Exchange, which has embarked on a program to migrate all its derivatives trading to an electronics platform, said it has seen a jump in trading of the Taiwan contract since launching a campaign to promote electronic trading in the product in April.

The number of contracts traded of the Taiwan product rose 31 percent to 691,871 in May from 529,285 in April, it said, adding that more than half the trades were done electronically.